Pensions and inheritance have been targeted by Rishi Sunak in £21billion tax raid

Budget 2021: Laura Kuenssberg's analyses Rishi Sunak's plans

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Chancellor of the Exchequer, Mr Sunak, surprised some experts yesterday after announcing a Budget light on tax changes. The Government unveiled a number of ambitious spending plans, allocating billions for local governments and giving Universal Credit recipients a boost with a taper cut. The NHS and public transport will also be given extra cash, but taxes remain at their highest level for 70 years. Mr Sunak defended the current high taxes yesterday, telling the BBC’s Today programme: “Of course I would not like it to be there. “It’s been caused because this country suffered the biggest shock it has suffered for 300 years.

“I was very clear about my desire over the course of this parliament to start reducing taxes for people.”

Some feared Mr Sunak would go for further tax rises and target wealth, but Nimesh Shah of Blick Rothenberg tells that the Government has already used a stealth tax to rake in more cash.

Mr Shah adds that this was the Government’s intention as part of a “clever” plan to bring in more cash without an outright tax hike.

He continued: “That has been the mood since March. In the March Budget they estimated freezing the allowances (of the pension lifetime allowance, income and wealth taxes) was going to raise £21billion come 2026.”

The £21billion figure is an estimate from the Government on what the freezing of allowances will raise.

He added: “It’s a very clever tactic from the Government because you don’t necessarily notice it happening. The inflationary aspect which you don’t necessarily pay much attention to is constantly eroding your wealth over that period of time.

“It was badged as a stealth tax back then and that’s exactly what it is. People need to be wise to this, they need to be wise to inflation, they need to be wise to the fact they are getting clobbered with more tax.

“People also have to bear in mind the 1.25 percent increase in National Insurance coming in next year, and if anything that could go up in the future.”

In March, the inheritance tax threshold was frozen at £325,000 until 2026, while the pension lifetime allowance was also frozen at £1.073million until the same year.

In September, Julian Jessop of the Institute of Economic Affairs told that the pension lifetime allowance should be scrapped.

He said the policy makes planning for retirement harder.

Mr Jessop added: “I think they should just abolish that. I think it is just an unnecessary complication that makes life very difficult for people in terms of planning their pension, and the only people who really benefit from that are tax advisers and accountants.

“Or you could get rid of the higher rate tax relief, it seems odd that higher rate taxpayers get more tax relief than poorer people from the state. That’s a potential unfairness that could be fixed.

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“But the lifetime allowance itself is just a bad feature of the tax system that should be abolished.”

Pensions have been at the heart of the economic debate recently, as the Government ditched the triple lock last month.

The triple lock guarantees that the state pension rise in line with inflation, average earnings or by 2.5 percent.

However, average earnings have been distorted by the pandemic, rising by 8.3 percent.

Such a big rise for the state pension was seen as unfair, so the Government opted for a double lock, meaning it will now rise by 3.1 percent in line with inflation.

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